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SEC Warns: KGTA Petroleum May be Ponzi Scheme

iStock_000006693339MediumThe securities and investment fraud law firm Fitapelli Kurta is interested in speaking to investors who have lost money investing in KGTA Petroleum Limited. (“KGTA”).

KGTA is an Akron, Ohio-based oil and fuel-trading business that in 2014 was alleged to be a Ponzi scheme. In May 2014 the Securities and Exchange Commission (SEC) filed an “emergency action” charging the founders of KGTA with operating a fraudulent business that raised over $20 million from investors. According to the SEC’s complaint, Kenneth Grant and Thomas Abdallah marketed KGTA as “a petroleum company that earns profits by buying and reselling crude oil and refined fuel products.” They allegedly told investors they would use raised capital to purchase fuel at discounted prices and sell it at profit; they also said investors’ funds and returns would “flow through an escrow fund monitored by attorney Mark George, who acted as the escrow agent.”

In fact, according to the SEC, KGTA “was a sham and the escrow safeguard was a mirage… Grant and Abdallah operated KGTA as a Ponzi scheme, George never followed the promised escrow procedures, and KGTA did not generate revenue through the purchase and resale of oil products.”

Grant and Abdallah allegedly sold the investments through two brokers, Jeffrey Gainer and Jerry Cicolani, both registered Cleveland-based broker-dealer Primesolutions Securities. According to the SEC, Gainer solicited at least sixteen investors who contributed $9.61 million; Cicolani solicited at least 41 investors who contributed $10.36 million; they also brought it one unidentified investor who provided about $1.5 million. Gainer and Cicolani allegedly received more than $6 million for their efforts.

According to Ohio.com, Grant and Abdallah operated a classic Ponzi scheme, using funds from new investors to pay legacy investors. Meanwhile they allegedly used the funds for personal expenses, “including car payments, country club dues, and more than $200,000 in cash withdrawals.”

Both Grant and Abdallah had a history of disciplinary actions, according to the SEC. Abdallah was convicted of money laundering in 2007 and “had two state tax evasion felonies.” Meanwhile Grant had entered into a cease-and-desist agreement with the Colorado Securities Commission in 2007, preventing him from selling unregistered securities.

The SEC’s investigation into the matter remains pending; so does a federal criminal investigation conducted by the Federal Bureau of Investigation.

If you or someone you know has lost money investing in the Ponzi scheme KGTA Petroleum Ltd., call the securities and investment fraud law firm Fitapelli Kurta at 877-238-4175 for a free consultation. You may be eligible to recoup your losses. Fitapelli Kurta accepts all cases on a contingency basis which means we only get paid if and when you collect money. Time to file your claim may be limited, so we recommend you avoid delay. Call 877-238-4175 now to speak to an attorney for free.

 

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